Ind-Ra revised outlook for auto sector to ‘neutral’ for FY23

India Ratings and Research (Ind-Ra) said that it revised its outlook for the automotive sector from "improvement" to "neutral" in 2022-23, with supply-side constraints and restraining local demand limiting growth.

In a statement by the rating agency, domestic car sales are expected to increase 5-9% year-on-year in 2022-23 and are likely to come down 5-8% in 2021-22, after three consecutive years of decline.

Although growth may be constrained by supply chain issues, next year's passenger car sales could increase by 5-9% due to temporary improvements in consumer sentiment and continued preference for personal mobility. 

"Semiconductor chip shortages could persist for the next few quarters while improving gradually," Ind-Ra said.

Increased operating costs, delayed recovery of low-end consumer purchasing power, and curbing local demand could limit two-wheeler growth to 5-8% next financial year, the agency said adding that it is expected to decline 10-13% in 2021-22.

The agency also said that the volumes for commercial vehicles are likely to grow 16-22% in 2022-23 as compared to 20-24% in this financial year, mainly supported by medium and heavy CVs aided by the recovery of economic activity and the increase in infrastructure investment.